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Different Scoring Models Result in Different Credit Scores

Most people are aware that their credit score affects their ability to borrow money and at what interest rate- but did you know that your actual credit score will depend on the model used to determine the number?  If lenders are using a numerical number to determine your credit-worthiness, is it possible that the lender checks your FICO score and denies you financing because the score is too low, but if they had checked your Beacon score you would have been approved for the financing?

Credit Model Types

There are three credit reporting agencies that are most recognized are Equifax, Experian and TransUnion.  It is from these agencies that you can obtain a copy of your credit report and credit score. Sometimes these companies are incorrectly referred to as credit bureaus.  Each of the reporting agencies use a different model to determine your actual credit score (and therefore your credit worthiness), and the result is you could have three completely different credit scores.

Equifax relies on the BEACON score model, while Experian uses the FICO Score, and TransUnion relies on the EMPIRICA score.  Each score model is derived from the Fair Isaac Corporation formulas, but each are slightly different.

Different Models, Different Scores

While all three models (mathematical formulas to determine the credit score of each individual) rely on using a weighted system that compares each person against others in similar age and income brackets, combined with their personal repayment history and other factors- the formulas are not exact and therefore result in three different scores.

The FICO score, likely the most commonly used credit score by lenders, will fall in a range between 300 and 850.  The median credit score of United States citizens is about 725.  Usually a score below 660 is indicative of less credit worthiness than an individual with a score above 660.

Introducing Yet Another Credit Score Model: Vantage

Because there is a difference in the scores offered from each of the credit reporting agencies, there has been a new scoring algorithm created in the spring of 2006.  It is called the "Vantage" score, and it is offered by all of the credit bureaus to creditors at this time- to get a more uniform scoring system in place.  Eventually, individuals will also have access to their Vantage scores.  At this time, Vantage scores are graded similar to school papers, with an A, B, C, D or F rating.  The credit score range or each rating is as follows:

  • A (901-990)
  • B (801-900)
  • C (701- 800)
  • D (601-700)
  • F (501-600)

Not all creditors are using the Vantage score yet, and it is unknown whether it will replace the FICO score at some point in the future as the most commonly accepted credit score for determining credit worthiness.  As of right now, most creditors will get an individual's three credit scores from each of the credit models and take the median number as the credit score they use to determine an individuals credit worthiness.